Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 926: Why Entrepreneurs Choose Risky R&D Projects - But Still Not Risky Enough

Erika Färnstrand Damsgaard , Pehr-Johan Norbäck (), Lars Persson () and Helder Vasconcelos
Additional contact information
Erika Färnstrand Damsgaard: National Institute of Economic Research
Pehr-Johan Norbäck: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Lars Persson: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Helder Vasconcelos: Faculdade de Economia, Universidade do Porto

Abstract: Entrepreneurs face higher commercialization costs than incumbents. We show that this implies that entrepreneurs will choose more risky projects than incumbents, aiming to reduce their high expected marginal commercialization cost. However, entrepreneurs may select too safe projects from a social point of view, since they do not internalize the business stealing effect. We also show that commercialization support induces entrepreneurship but may lead to mediocre entrepreneurship by inducing entrepreneurs to choose less risky projects, whereas R&D support encourages entrepreneurship without affecting the type of entrepreneurship. Using Swedish patent citation data, we find empirical support for predictions of the model.

Keywords: Entrepreneurship; Innovation; Start-ups; Ownership; Breakthrough; Quality

JEL-codes: G24; L10; L20; M13; O30

41 pages, September 18, 2012

Full text files

wp926.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:42.